Correlation Between Korea Real and TSE
Can any of the company-specific risk be diversified away by investing in both Korea Real and TSE at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Korea Real and TSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Real Estate and TSE Co, you can compare the effects of market volatilities on Korea Real and TSE and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Korea Real with a short position of TSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Real and TSE.
Diversification Opportunities for Korea Real and TSE
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korea and TSE is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate and TSE Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TSE Co and Korea Real is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Korea Real Estate are associated (or correlated) with TSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TSE Co has no effect on the direction of Korea Real i.e., Korea Real and TSE go up and down completely randomly.
Pair Corralation between Korea Real and TSE
Assuming the 90 days trading horizon Korea Real Estate is expected to under-perform the TSE. But the stock apears to be less risky and, when comparing its historical volatility, Korea Real Estate is 4.26 times less risky than TSE. The stock trades about -0.04 of its potential returns per unit of risk. The TSE Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4,116,348 in TSE Co on October 9, 2024 and sell it today you would earn a total of 313,652 from holding TSE Co or generate 7.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Real Estate vs. TSE Co
Performance |
| Timeline |
| Korea Real Estate |
| TSE Co |
Korea Real and TSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Real and TSE
The main advantage of trading using opposite Korea Real and TSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Real position performs unexpectedly, TSE can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in TSE will offset losses from the drop in TSE's long position.| Korea Real vs. Dongwoo Farm To | Korea Real vs. ENERGYMACHINERY KOREA CoLtd | Korea Real vs. Kukil Metal Co | Korea Real vs. Nam Hwa Construction |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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